Long Island Trust Lawyer
A trust can be an important planning tool to manage your assets, as well as for passing your assets on to your loved ones. While trusts may offer exceptional benefits to those with substantial assets, a trust can be used in many different situations.
In fact, people may fail to appreciate the power a trust can have as a part of a well-crafted estate plan—a costly mistake. Trusts can be both flexible and powerful, containing instructions as to how and when to pass your assets on to your beneficiaries.
Not only can a trust help keep your affairs private and allow your loved ones to avoid the probate of your estate, but a carefully crafted trust can also have the added benefit of minimizing or even eliminating, estate taxes. A trust can preserve your assets in the event you need long term care and can also help you gain control over the distribution of your assets.
An effective trust is one that is carefully drafted by a qualified attorney who has a comprehensive knowledge of your specific situation, as well as a deep knowledge of current laws. After a thorough, thoughtful evaluation, an estate planning attorney from Esther Schwartz Zelmanovitz, PLLC can help determine if a trust is right for you, and, if so, which type of trust is most appropriate for you.
Revocable Trust vs. Irrevocable Trust
Every trust is either a revocable trust or an irrevocable trust. As the names imply, a revocable trust can be changed or revoked entirely, while an irrevocable trust cannot.
While this is not an exhaustive list, both revocable and irrevocable trusts have the following benefits:
- Probate can be avoided, thus avoiding the cost, time, the public nature of probate, as well as the forum which allows creditor claims and contests.
- The estate and affairs remain private.
- There is much more flexibility and control over the distribution of assets.
- Provisions can be drafted to protect assets for disabled beneficiaries or beneficiaries that may have financial issues of their own.
- Continuity of asset management is maintained during disability of the grantor.
A revocable living trust can be amended at any time by the person who made the trust, which gives that person, known as the “Grantor” of the trust, much more flexibility. A Grantor can add property or other assets to the trust, or a Grantor can remove property if he or she wishes.
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Living Trust vs. Testamentary Trust
Every trust is either a living trust or a testamentary trust. A living trust is a trust is created during a grantor’s lifetime. A testamentary trust is a trust created under a person’s will, so is only created after death. There are advantages to setting up a living trust which can be managed and funded during your lifetime, without court intervention, and there are times when a testamentary trust is a more appropriate option. This would be determined based on each person’s specific objectives and needs.
Some specific types of trusts include:
- Medicaid Trusts are trusts which protect assets from being spent down on long-term care. A Medicaid trust is an irrevocable trust which protects one’s assets so that a person can qualify for Medicaid to pay for their long-term care (nursing home, home care, or in some instances, assisted living) without the need to spend down their money that is placed in the trust. In New York, Medicaid has a five-year look-back period for nursing home care eligibility, so to ensure that Medicaid will cover your long-term nursing home care costs without a penalty, it is ideal to fund a Medicaid Trust as early as possible, with the aim of at least five years passing before there is a need for a nursing home.
- Irrevocable Life Insurance Trusts are trusts which minimize estate taxes by removing a life insurance policy from being counted as part of the estate for tax purposes. An irrevocable life insurance trust is funded with a life insurance policy. You might wonder why you would choose an irrevocable life insurance trust as opposed to simply naming a beneficiary to your life insurance policy. The potential legal and financial benefits to heirs with an irrevocable life insurance trust include removing the life insurance proceeds from being counted as part of your estate for estate tax purposes, asset protection for beneficiaries, and your ability to direct and control the distribution of the proceeds with greater detail than by simply naming individual beneficiaries outright.
- Credit Shelter Trust/Disclaimer Trust/Marital Exemption Trust are trusts that are created under a person’s will or within their existing trust to minimize the effect of estate tax and remove assets from a surviving spouse’s estate. These trusts are irrevocable trusts, designed to drastically reduce or eliminate federal estate taxes for a married couple’s estate by taking advantage of each of their individual federal and estate tax exemptions. Depending on how it is structured, the trust may hold the assets of the first spouse to die. Rather than passing those assets along to the surviving spouse, the assets are removed from the surviving spouse’s taxable estate, diminishing estate tax liability. Your surviving spouse will retain certain access rights to assets, even though those assets are held in trust. Essentially, the assets bypass your surviving spouse’s estate after your death. When the surviving spouse dies, the assets are distributed to the trusts’ beneficiaries.
- Special Needs Trusts, also known as Supplemental Needs Trusts, are trusts that are designed to allow a disabled individual that is receiving government benefits, such as Medicaid or SSI (Social Security Income) to use and enjoy assets held in the trust without risk to interruption of discontinuance of their need-based government benefits.
There are a number of other trusts to suit each specific need. While the above are general types of trusts, there is no trust that is a “one-size-fits-all.” Every trust has specific provisions tailored for each individual’s unique needs.